The World Bank’s Message | Dr Hafiz A Pasha

During her recent visit to Pakistan, the managing director (MD) of the World Bank, Mulyani Indrawati, published an article in this newspaper titled “How Pakistan can realise its potential”. Her basic message is that Pakistan “can and should do much better”, given its many assets. She highlights the country’s vast water and river endowment, its coastline and cities and its natural resources.

Unfortunately, we have not done much with these assets. Pakistan is already a water-stressed country, with the prospect of water shortage in coming years. The World Bank must be thanked for its extremely positive role in the early finalisation of the Indus Water Treaty. Thereafter, we have built only two major dams, the last in the early 1980s. One of the world’s finest irrigation systems is run down and with extremely low water prices, there is massive wastage of scarce water.

Energy resources, besides hydroelectricity, are limited. Gas reserves are getting depleted rapidly. The oil extracted domestically meets only one-fifth of the requirements. Pakistan does have a relatively high rate of urbanisation. However, the primate city and economic hub, Karachi, hassuffered large-scale violence and breakdown of law and order. Clearly, we have not utilised our assets well, including that of a young and growing labour force. Only one-third of the potential entrants into the labour force found jobs last year.

Ms Indrawati also highlights three upsides of Pakistan: a growing middle class, a lively informal economy and a strong influx of remittances. But she has probably not been informed that the middle class of Pakistan, which was growing rapidly a decade ago, has now started shrinking due to high unemployment rates of educated workers and rapid increases in the cost of living, especially of housing and utilities. The informal economy has lost its dynamism in the presence of slow growth. In 2013-14, the employment in the informal sector increased by only one per cent, as compared to the annual five per cent less than a decade ago. Fortunately, a major sustaining force has been the rapid growth of home remittances, which have now approached two-thirds of merchandise exports.

Ms Indrawati does not identify the usually mentioned factors like terrorism, large-scale power outages and law and order as limiting the realisation of our potential. Instead, she focuses, first, on improvement of education and greater gender equality and, second, on the need for Pakistan to integrate more, globally and regionally.

We must appreciate her emphasis on social and human development. She laments the low net primary enrolment rate of only 57 per cent and the female participation rate of only 25 per cent. She may not know that recent trends are even more worrying. These include a decline in the literacy rate, stagnant enrolment rates, fall in coverage of the immunisation programme and in access of households to improved water source. In social indicators, we are well on our way to becoming a least developed country rather than a middle income country.

The question is can the World Bank remain only a passive by-stander to the faltering development process in Pakistan? The Bank has, in fact, been a key development partner and the largest multilateral development agency operating in Pakistan. Currently, the outstanding debt of the country to the Bank stands at over $12.5 billion. The current portfolio of active projects and programmes represents a commitment of over $5 billion.

Do the ongoing interventions by the World Bank reflect Ms Indrawati’s priorities? The answer is ‘no’. Projects and programmes of the Bank in the social sectors, especially education, add up to less than one-fourth of the total portfolio. In the early 1990s, the Bank did make a major foray into social development with the Social Action Programme (SAP). But it retreated in the face of limitations in implementation capacity with the provincial line departments and the issue of financial sustainability of recurring expenditures.

The only major engagement of the Bank in the area of gender equality is the Benazir Income Support Programme. But this programme remains limited in size and covers less than half the women in poor households. Perhaps, following the MD’s visit, the Bank will put in more soft funds to upscale the programme and help in converting it into a conditional cash transfer by adding an amount in the monthly support for sending the girl child to school.

Despite Ms Indrawati having made only a passing mention of the power sector, the sector represents the major area of engagement of the Bank, with over 40 per cent allocated to ongoing programmes/projects. In fact, since the mid-1990s, the Bank has played a key role in the development of the power sector. It has promoted measures like unbundling, corporatisation and privatisation. Clearly, it should be willing to share some responsibility for the high levels of outages, losses and circular debt in the sector today.

The second element of the strategy for realising Pakistan’s potential that Ms Indrawati recommends is greater regional and global integration. She will, no doubt, be pleased to see that China has already emerged as our largest trading partner, especially after the signing of the free trade agreement with it. Pakistan has transited from a positive to a negative list in its trade with India. Over 90 per cent of Indian exports now have access to the Pakistani market. Today, India exports four times as much as it imports from Pakistan. There is a need for some reciprocity from India in terms of softening some non-tariff barriers and reducing tariffs on agricultural and textile imports. Pakistan is also an active participant in Safta. Ms Indrawti has supported energy trade. Perhaps, now the Bank will consider supporting the Pakistan part of the Pakistan-Iran pipeline.

Ms Indrawati emphasises the need for implementation of the China-Pakistan Economic Corridor. With $46 billion of investments in infrastructure, especially in power, by China there will be a much greater scope for focusing the engagement of the World Bank towards the areas she has emphasised. As mentioned earlier, these include social development, especially education, gender equality, population planning and regional integration. Pakistan should look forward to this new supporting role by the World Bank.

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